Market structures play an important role in the economy today. The strategic and profit maximizing concepts are determined by the type of market structure. “Market structure is best defined as the organizational and other characteristics of a market.” (Riley, 2006) Competitive markets, monopolies, and oligopolies three of the four market structures in the economy. A competitive market or perfect competitive market is a market that has many buyers and sellers that do not influence prices. An example of a competitive market would be the street vendors selling bottled water along the sidewalk of a tourist attracted city. There are likely to be many vendors and buyers alike. Most notably the influence of each vendors input on price is low. The opposite of a competitive market is a monopoly. Monopolies affect the economy with considerable control over supply and price. The definition of monopoly is when the single seller of a product controls its market and does not allow competition. Local telephone, cable, and water, which are a natural monopoly, are examples of monopolies. Each of the companies has complete control for the distribution of their products or services in regards to supply and prices. Oligopolies are types of imperfect competition in the market structure. An oligopoly is where only a few sellers offer similar or identical products. Consider watching a basketball game at any level of competition. The athletic wear, footwear, and accessories worn by players are more than likely Nike, Addidas, or Reebok. These companies sell products that are similar and are for the same purpose, yet they are not identical. This type of market structure is also known as monopolistic competition. Oligopolies have considerable control over some of the prices of the products they sell. The characteristic of each market structure are important to understand the role of each structure.
The determination of price in terms of maximizing profits is best...
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